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Federal Reserve Chairman Jerome Powell

The Dow Jones Industrial Average surged more than 600 points Wednesday, erasing its November tumble, after Federal Reserve Chairman Jerome Powell eased investor worries about an aggressive increase in interest rates.

In remarks Wednesday before the Economic Club of New York, Mr. Powell said interest rates are “just below” broad estimates of a neutral level—a setting designed to neither speed nor slow economic growth.

Federal Reserve Chairman Jerome Powell comments on the path of monetary policy during a speech at the Economic Club of New York. (video)

Reuters: Fed's Powell, in apparent dovish shift, says rates near neutralU.S. Federal Reserve Chair Jerome Powell injected investors with a strong dose of optimism on Wednesday, saying that the central bank’s policy rate is now “just below” estimates of a level that neither brakes nor boosts a healthy U.S. economy, comments that many investors read as signaling the Fed’s three-year tightening cycle is drawing to a close.

“We know that things often turn out to be quite different from even the most careful forecasts,” Powell said at an Economic Club of New York luncheon on Wednesday. “Our gradual pace of raising interest rates has been an exercise in balancing risks.”

The Fed chairman brought smiles to trading floors yesterday with a speech at the Economic Club of New York.

He needed only two words. Mr. Powell said that the Fed’s benchmark interest rate was “just below” the neutral level. Investors took that to mean that the central bank would stop raising rates soon.

That sparked a market rally. Stocks soared 2.3 percent, erasing the losses from a rocky November. (Investors may have also noticed that the bond market has signaled that the case for interest rate rises is weakening.)